Before Twilio, adding a voice, video, or text-chat feature to an app was difficult. Telecom companies had archaic technology and wanted to lock other companies into long, expensive contracts. Jeff Lawson, the founding CTO of StubHub, along with Evan Cooke and John Wolthuis, wondered why a developer wasn't able to add telephony and messaging capabilities to an app. So, in 2008, the three started Twilio, a San Francisco-based business-to-business cloud platform that allows sexier companies like Uber, WhatsApp, and Airbnb to do just that.
By making a low-cost utility available to some of Silicon Valley's hottest startups, Twilio became a hot startup itself and attracted $240 million from an all-star cast of individual investors. Valued at $1 billion before its June initial public offering (and now about thrice that), Twilio was one of the few unicorns to go public in 2016. As a kind of test case, Lawson has proved that there's still a market for high-growth tech companies--even if they aren't yet profitable.
Inc: Most other companies in the unicorn club have stayed private. Why did you decide to go public?
Lawson: With B2B cloud companies, and especially a platform like Twilio, the number one thing you're selling is trust. As a cloud company, you sell a service, but above all else a cloud company sells trust--trust that we're going to execute on this thing better than you or a competitor can. The cloud is really about giving up control with the belief that another company that specializes in doing this thing can do it better, whether you're betting that Salesforce is going to run CRM very well for you or whether it's a platform like Twilio running your communications. So, going public was a great way to continue to build and demonstrate that trust, because it makes the company an open book that customers can look into.
After spending years raising more than $200 million in venture capital and being valued at $1 billion, was this the right way to take care of your investors?
We didn't go public to take care of our investors. We went public because it was the right thing for the company. Going public at that point in time would accelerate our leadership role, and that's good for the company, good for our customers, and good for everybody, right?
But, when you take venture capital, I do believe that you have committed to providing a return on investment at some point. There is no specific time frame on that. Obviously, investors have time frames. But those are fairly long; you're talking seven to 10 years for a fund. We were not getting pressure to go public.
Twilio didn't have much competition in the IPO market this year. Did you worry that there wouldn't be an appetite for a cloud company?
I will be honest--I didn't expect that we would be the first Silicon Valley unicorn to go out in this period of time. When it became apparent it was time for us to make the decision and there was no recent precedent, it was kind of exciting to say, "OK, I guess we'll be the ones who figure out the appetite for IPOs in this market."
You went with J.P.Morgan and Goldman Sachs, two traditional Wall Street firms. How do you go about finding the right banks? Why these two?
Like most things, when you're picking a service provider, it's about the relationships and people. The name of the firm is not as important as the people. That's the big factor. It's like picking a lawyer or an accountant. It's less to do with the firm and more to do with the people you work with every day.
You went public on June 23. How did you celebrate that night?
The night of the pricing, we were in New York City and had a nice dinner at the Capital Grille steakhouse with all the people who were able to come out to the first-trade festivities the next day. The following day, we did our first trade. That's the day after the pricing, and that was obviously a lot of fun. After the Stock Exchange itself, we flew back to San Francisco and had a little celebration with the team there. It wasn't a raging party. One of the important things for us about the IPO was to make it clear to all Twilions that this is day one. We don't think this is done. This isn't an exit.
So, you see going public as a non-exit. Why is that an important distinction to you?
Well, because it's true. If you look at what going public enables, it's just the beginning of the next stage of the company. But if you think it's an exit, it can send the message that it's the end, and if you're an investor, you do not want to invest in a company that feels it is at the end. That's not the way an entrepreneur or a CEO or anybody involved should think about going public. I don't really understand the notion of exits, personally, because the point of building a company is to make it bigger and stronger every day, and fundraising and going public help you achieve the goal of creating a long-term, great company. So, the notion of an exit is just contrary to that goal. It's like saying, Why do you live? "Well, I'm living in order to die one day." That doesn't really make sense, right?
What advice do you have for entrepreneurs who want to bring their company public?
Focus on building a great company, because that's what's in your control. The things you do to build a great team, great products, great customers, a great business model, that's in your control. You can't control exits and you can't control public markets and you can't control who might buy you. But if you succeed in building a great company, then you've got the maximum number of options available to you, and that's what you want as an entrepreneur.